G20 summit: Right song, wrong singers

Whatever the outcome of this week's G20 summit, two things are certain. First, it will be hailed as a success. Second, it will be dismissed as a failure.

Summits are often like that, ending in agreements long on principle and short on detail that allow all sides to chalk up a result. This time, however, another - more personal - game is afoot. The Tories, and many others on hubris-watch, are itching to write off the G20 as a humiliation for Gordon Brown. Fair dos, perhaps, for all the months in which the prime minister foolishly talked up prospects for the conference in his capital. Had Mr Brown been better at managing expectations, he could have expected a fairer hearing for the measures set to be announced tomorrow (according to drafts of the communique leaked this weekend). More regulation of the shadow banking system and greater attention to banks' management of their capital - there is some meaty stuff here, even if it does not go far enough. But, for politicians and media people who do not really do policy, all this will probably be lost in the Brown-baiting.

Then again, one of the features of this summit is that the right things are being said by the wrong people. So whatever the merits of Mr Brown's comments yesterday about the need for fairer, more moral markets, they sound plain odd from the man who was the light-touch chancellor. And Barack Obama is right to call on China, Japan and Germany to pump more money into a world economy showing distinct depressionary characteristics. But for any government to take policy advice from America, the nation that brought us this financial cataclysm, would be like getting stock tips from Bernie Madoff.

The problem with the UK and US positions is a fundamental one: they are all mouth and no money. Mr Brown and President Obama are running big current account and budget deficits that limit their room for manoeuvre. They can call for reflation of the world economy - but they do not have the cash to do it on their own. And those solvent countries with big current-account surpluses, whether in Asia or Europe, are in no mood to listen. This is the first economic crisis in decades in which political muscle and financial might are so badly misaligned. At the Bretton Woods conference of 1944, Washington had the money that enabled it to call the shots. In the emerging-markets crisis at the end of the 90s, the US could act as the consumer of last resort, buying goods from struggling Asian exporters. Pursuing that policy for so long helped to lead America into this predicament - it certainly cannot do it now.

This political lopsidedness is an expression of some fundamental imbalances in the world economy. Speaking at a Guardian debate last month, the leading Indian economist Jayati Ghosh identified three major imbalances: the imbalance between finance and the real economy; the huge current-account deficits run up by America and Britain while Asia and oil-exporting countries amassed large surpluses; and a world economy overdependent on exploiting natural resources. To which can be added a fourth imbalance: between those right at the top of the economic pile and everyone else.

These four factors made this decade's boom so lopsided that consumers in America and Britain bought goods from Chinese capitalists who then lent them money to buy more Chinese goods. It was a mad system whose contradictions were disguised by cheap money and asset-price bubbles - for a time. In many cases these imbalances will only be put right by redistributing wealth away from those who have done well out of the globalisation game, to those who have lagged behind. In G20 terms, that means following reflationary policies (since it is the poor who tend to spend more) and clamping down on the finance industry's power. If this week's summit makes real moves in this direction, it will not be a total failure.

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